Cover Story: Super-managing the private fleet

September 1, 2001

It is a decent bet that no 20th century Canadian carrier remained unchanged, clung to bad habits and survived in good health to serve the new millenium. But where a miscreant owner of a common carrier...

September 1, 2001
by
Carroll McCormick

Categories

It is a decent bet that no 20th century Canadian carrier remained unchanged, clung to bad habits and survived in good health to serve the new millenium. But where a miscreant owner of a common carrier has practically nowhere to go but down with his ship, there is always someone ready to cast off a private fleet that cannot justify its keep.

As Richard Bickley, manager of land transportation for Alcan readily attests, “every time we renew the trucks, every four years, we reassess the cost-effectiveness of the fleet. We do this very rigorously. I find it harder and harder to deal with the cost of the private fleet.”

While this constant reassessing of options is indicative of the continuing scrutiny private fleets operate under, it’s also revealing of the new strategies private fleets are employing and the evolutionary change in the role of the private fleet manager. No longer just a trucking department with a solitary focus on managing outbound freight and the trucks that haul it, the new private fleet has embraced its role in the entire supply chain. And the person managing the private fleet has had to learn to be comfortable with evaluating a broad range of outsourcing options, improving efficiency with information technology while at the same time coordinating inbound freight and/or chasing after revenue opportunities that can improve the bottom line.

Alcan’s private fleet of 16 tractors and 37 trailers, both open and closed, drivers, terminals and maintenance – is entirely leased. It handles just 10 percent of the company’s transportation needs, and serves a unique role, according to Bickley. “We have the fleet to support mill products and to provide us with a benchmark for trucking costs. It also gives us the flexibility to use the fleet when there is a special activity or to create a new run; this permits us to understand the costs around it.”

The fleet has changed over the 11 years he has been with Alcan, but says Bickley, “the changes are very small … there to make sure we are still cost effective.” Having said that, he adds that fuel cost management has evolved a lot. “In ’94 or ’95 we started putting a more intense onus on fuel saving. We scrutinize our fuel consumption very intensely. We took a year to develop the statistics and benchmark for fuel consumption for the different seasons. We spec the trucks for the most cost-effective fuel consumption. Our drivers get a bonus [this program is about three years old] if they meet our objectives for fuel consumption. We are making progress every year.”

The fleet has also expanded to provide third party service. “We used [to use] the fleet only for Alcan purposes. Now we carry some freight for other companies,” explains Bickley. “We have a special agreement with another dedicated carrier and we also have different service contracts for local delivery in Toronto. We are picking up freight from a plant and delivering it to the client and picking up product from the client for long haul to Montreal. This is not a major change, but rather a service fine-tuned for a very specific customer.”

Bickley’s job has also changed. “I used to be the manager of transport services and responsible for the fleet, warehousing and the invoicing system. Now with certain mergers of jobs I am responsible for all of the other land transportation contracts, whether for the road or rail,” says the past chairman of the Canadian Industrial Transportation Association, an influential lobby group for shippers.

Although he solicits expert help in technical areas such as the fleet equipment and in setting up driver incentive bonuses, Bickley brings an advanced education – a BA in administration and an MBA in material management – to his clearly challenging job. “You can’t have enough education. It is a real lesson in humility..”

Another super-fleet manager and product of the changing role of running a private fleet as part of a larger company machine, is David Faoro. He is the director of transportation for Unisource Canada Inc, with its headquarters in Richmond Hill, Ont. His responsibilities include managing private fleet operations 20 percent of the time, purchasing inbound and outbound transportation and heavy involvement in technical implementation. Faoro helps the delivery supervisors in each location with, for example, tools, equipment and buying. “I am doing a lot of work these days on the whole inbound supply chain.”

He has worked in logistics since the mid ’80s in different roles and has a Bachelor of Commerce and an MBA. He sees the modern role of a fleet manager, if that handle really fits any more, as a logistics specialist who, one might say, does what logistics is: “The entire process and flow, right from where goods are manufactured, to the consumer, and the management of the entire process,” he says.

“From a logistics perspective it is almost more about the management of the flow of information rather than managing the flow of produce because it is information that drives these activities.”

“In my mind a fleet manager was someone for whom 100 percent of his responsibility was management of the private fleet. Now we see the evolution of the role where fleet management is just one of the many things they do.”

“What you really want today is someone with an appreciation of the daily challenges of the private fleet; for example, traffic and customers. But he must also understand how the fleet fits into the overall company strategy. How can I, the fleet manager, help implement that strategy?”

Seen as the real expert in the customer and the delivery service, Faoro says that the fleet manager, “is being drawn upon to help provide solutions. It is also a culture issue of how companies work today. There is less compartmentalization of duties [and] more team-based types of work.”

His fleet has 200 trucks, mostly five-tonne, city delivery trucks, with some semis. Yet he outsources, using couriers for some deliveries, same day, overnight. “We are constantly looking at different options to find the best balance of costs and services,” explains Faoro, adding that the private fleet is just one component of the overall logistics costs – a daily function – for which he is responsible.

Increasing competition and pressure on margins has driven the introduction of a lot of technology at Unisource to maintain service and reduce costs. “We recently implemented some route structure software that optimizes the routes drivers take to the customers while meeting all of the customers’ delivery requirements,” says Faroro. Just in Time Delivery is, he adds, “a huge operational challenge and the bar keeps being raised.”

Mobile communications is likely to be the next wave of technological invvestment to impact private fleets. While many of them adopted onboard computers more than a decade ago, price and the initial focus of mobile communications providers on the needs of long-haul carriers kept most private fleets, which operate more local and regional runs, out of the picture. That is no longer the case. Mobile communications providers – Cancom Tracking Solutions, PeopleNet Communications, Terion Inc. and @Track Communications, to name a few of the major players in the Canadian market– are directly targeting private fleets with more cost-effective wireless technologies. In turn, private fleets are warming to the advantages of real-time information provided by such technologies.

“For many years we’ve overlooked short-haul carriers. But their communication requirements are even higher than for long-haul carriers,” says Rick Ibsen, director of sales for Mississauga, Ont.-based Cancom Tracking Solutions. “There was a mindset in the industry that ‘I don’t need satellite because I don’t leave the Greater Toronto Area.’ That’s changing. People are realizing that the most efficient way to get information is to have the driver keypunch at source.”

As much sense as investment in technology does make, however, private fleet managers may still face an uphill battle in convincing company executives that still view the private fleet as a cost centre to spend money on new technol
ogy, particularly during hard economic times.

Yet Ibsen says two-way satellite communication and data exchange can be an effective way for private fleets to save money,. “Private fleets are under constant pressure to make sure they are doing a good job … or the company will close it down and give the work out to other carriers.”

Cancom, a wholly-owned subsidiary of Shaw Communications in Calgary, is the exclusive Canadian distributor for the OmniTRACS automatic vehicle positioning system that also allows two-way messaging between the driver and dispatcher.

“What fleets typically do is integrate our product with their existing dispatch programs,” says Ibsen. The driver keys in his information and it goes into the dispatch program.

Relieved from time-consuming data entry, dispatchers have more time to organize loads. “By freeing up dispatcher time we have seen fleets where they can increase the number of loads delivered by 10 percent to 20 percent,” says Marc Fuentes, marketing communications specialist with Cancom. “If you just look at the dispatch function,” adds Ibsen, “we believe that the dispatcher can double his productivity..”

Information from the truck also goes to load planners, safety, customer services, payroll, billing and the maintenance department. Information such as load assignment flows to the truck as well.

And wireless communication can also feed information to clients or most anyone else with a need to know, giving supply chain visibility.. “A big private carrier [may] have a Website clients can access to see, for example, load information.” says Ibsen.

If you are tracking the truck, the next logical step is to track the trailer. Trailers tend to disappear into operational black holes on a regular basis. By one account, three to five percent of a fleet’s trailers are lost at any given time. That forces fleet managers to run higher trailer-tractor ratios than is financially reasonable in order to compensate. Seeing the problem, mobile communications providers have made concerted efforts over the last couple of years to address it, providing yet another way for private fleets to run more cost-efficient operations.

New technologies can improve efficiencies; taking on more responsibilities can improve the fleet’s value to the company.. But in the end are people like Faoro, Bickley amd the thousands of private fleet managers like them simply finding better ways to manage an anachronism, buying the private fleet just a little more time against the inevitable? Let’s give Faoro the last word:

“Given our critical mass, we can source trucks as well as anyone else … also fuel purchasing. We also feel we have the capacity and tools to create route structures as well as anyone else. That says there is a definite role for our private fleet. What would a third party do that we can’t do?” –